"There's a sucker born every
minute" - P.T. Barnum
As you read this, the range of frauds
being perpetrated,
range from the pensioner who is being defrauded of
$10.00 by the
scammer operating the phony children's camp, to
large frauds such as
the United Nations who are being defrauded of
millions of dollars by
people in countries where the UN is attempting to
assist that county.
No country, town or city is immune from
fraudsters. No organization,
large (Enron) or small, can be excluded from the
effects of fraud.
Fraud can be launched
from within an organization (e.g.: employee fraud)
or can be
perpetrated from outside the organization (e.g.:
supplier fraud).
Fraud can also be targeted against
members of the public,
in almost unlimited ways. With the advent of
e-mail, the instances of
possible fraud have grown dramatically.
Following is a copy of an e-mail
received recently, which
is a version of the "Nigerian scam", one of the
most prolific e-mail
frauds. Rumour has it that this type of scam
accounts for a large
percentage of the country's revenue!
Click here to
read e-mail -
Do a search on the WWW
for "Nigerian scam"
and spend some time following the results.
This
type
of scam has been around for years - and for good
reason - people still
think they are going to "earn" millions of dollars
for just "letting
someone use their bank account". Of
course, what really happens is that once you give
out your banking
information, you will notice that your bank
balance has changed -
unfortunately, the balance will have decreased as
the thieves will
attempt to clean out your bank account. Even
though there have been,
and are warnings (not to mention, "common-sense")
about giving out
confidential information, these scams persist
because people continue
to hand out their confidential bank information to
complete strangers,
simply because they received an e-mail message
that will "make them
rich". Another type of e-mail scam is known as
"phishing" where you
will receive an e-mail from the "security
department" of a bank, credit
card company or on-line payment transfer company,
stating that your
confidential information has to be updated. The
perpetrator will then
give you a web link to go to to "update" your
information, such as bank
account or credit card information. Unfortunately,
the web site you are
sent to belongs to the fraudster who uses your
confidential information
to make purchases using your money or credit.
Remember that no
bank,credit card company or on-line payment centre
will request such
information from you via e-mail. If you receive
such an e-mail request,
simply hit the DEL key on your e-mail software to
get rid of this
message and report it to your bank and local
police department.
It seems that if people are presented
with a plan to make
higher than usual interest rates or large sums of
money for little or
no work, they will "invest" in such schemes. You
usually have a better
chance of making such high returns on your
investment, if you take the
cash and visit your nearest casino! One scheme
that I am well aware of
was run by an "investor" who promised people a 45%
return on their
investment within six months. All of those who
invested are still
waiting (after 10 years) for the return of their
original investment.
Unfortunately, many were retirees who took a 2nd
mortgage on their home
to fund the investment and are now having a very
unhappy retirement,
while the fraudster is improving his golf game in
the southern US.
Of course, the "home improvement"
scam has been around
for years, where a representative of a company
will knock on your door
as they are "in the neighbourhood" doing work for
one of your
neighbours and can give you a "deal" on some work
at your house. Don't
fall for it! Don't give any company an upfront
deposit for any work
before you check them out through your local BBB,
Chamber of Commerce
and other such agencies. The best recommendation
you can get for any
company is to talk to some of your friends who
have used the same
company in the past and who have been happy with
their service and
products.
Another type of fraud perpetrated on
the public is the
selling of "franchises" that promise large rewards
for little effort.
One such type occurred in an Eastern Ontario city
recently, where a
company was selling jewelry kiosks, that promised
to make you rich. The
company would supply the kiosk, the jewelry and
give you prime mall
locations to sell this "stuff" in and make your
fortune. All you had to
do was send them a cheque and wait for this
"priceless" opportunity to
arrive at your door. What really happened was that
you "might" receive
something from the company (or maybe nothing) but
usually the product
was "junk jewelry" - hardly worth the postage.
What certainly happened
was that your cheque was cashed as soon as it
arrived at the company.
So, you're now out some hard-earned cash (usually
at least $20,000) and
you have little or nothing to show for it! Of
course, you can contact
the local police department or the RCMP, but
usually they are so busy
solving other larger dollar crimes that they do
not have the time nor
the manpower to assist you. If you attempt to get
your funds back
through legal means, you will probably find that
the company has gone
bankrupt or left town. The case mentioned above is
still in the Court
system, so I can't mention names, but the police
are aware of millions
of dollars obtained through this scam from
investors across North
America. I'm sure there are many millions more we
don't know about,
simply because those who were duped are too
embarrassed to come forward.
Charity fraud has also grown in
recent years, where you
are contacted (by the local police or fire
association to donate funds
to assist them in sending "underprivileged"
children to hockey games -
the circus or a camp. Unfortunately, the only
people assisted by your
generosity to these "charities" are the
perpetrators of the fraud, who
take your money. Recently, I received a telephone
solicitation from
(supposedly) the local police association to help
their fund-raising by
advertising in their printed program. As I was
talking to the charity
"representative" (who assured me that my donation
would help
underprivileged kids) I had a detective from the
local police sitting
across the desk from me in the office and he
assured me that this was
not a legitimate organization. As I started asking
the caller pertinent
questions - "Where exactly is your office?" -
"Whose the president of
the association" - he seemed to figure out that I
really didn't believe
his pitch and hung up the phone. There are many
worthwhile charities
out there, whose fund-raising efforts are being
hurt by these scam
artists. If you receive a solicitation, check out
the supposed charity
by contacting your local BBB, Chamber of Commerce
or the police. Limit
your donations to "known" charities. Some
fraudulent "charities" use
names very similar to well-known, honest charities
- so be careful who
you are handing your money over to.
The Canada Revenue Agency (CRA)
maintains a listing of
Canadian "charities" whose registration has been
revoked. They also
maintain a repository of charitable financial
information filed
annually by charities, whose registration is still
valid. Click HERE to go to
their web site to do a search on a charity.
Remember- you worked for your money.
Don't give it away
to scam artists!
CORPORATE FRAUD
Anyone who knows basic accounting and auditing, is
aware of the phrase
"separation of duties". This refers to the fact
that no one employee
should be left in a position to both perpetrate
errors and to conceal
errors or irregularities in the normal course of
his\her duties. An
example - the person who has control over the
company cheques may
decide to give themselves an "unauthorized raise"
by stealing a company
cheque and forging the signature of a signing
officer. If that same
employee is in charge of maintaining the company's
cheque register and
doing the bank reconciliation, he may be able to
suppress the recording
of the fraudulent cheques and prevent the
discovery of the fraud which
would normally be uncovered through the bank
reconciliation. Control of
such irregularities involves eliminating the
opportunity for
concealment - by assigning the bank reconciliation
duties to another
employee. Obviously, collusion between the two
employees would
circumvent this control. There have been some
really "dumb" frauds
carried out by employees, which are discovered
fairly quickly - because
of basic controls, such as the separation of
duties. The smaller the
company, the more management has to oversee the
basic functions, such
as reviewing expense invoices before signing
cheques, reviewing the
number and amounts of the payroll cheques to
ensure that all cheques
are going to actual employees and that the amounts
being paid are
reasonable, reviewing the monthly listing of
customer accounts
receivable to ensure that cheques received for
payment of these
accounts are being credited to the bank of the
corporation and to the
correct customer accounts and, reviewing purchases
made on corporate
credit cards to ensure they are for the benefit of
the company. These
do not have to be done monthly but should be
carried out fairly often
and on a random basis.
Every business should have a
corporate fraud policy, and
that policy should be mandatory reading for all
employees. The policy
should be posted for all staff to see. Of course,
management should
practice what it preaches. There is not much sense
in having a fraud
policy for employees when management cheats by
expensing personal items
through the company and "laughs off" the whole
idea. Management must
set an example. Retain a knowledgeable fraud
consultant to assist your
company in drafting its fraud policy. If an
employee is caught having
committed a fraud against the organization, then
prosecute that
individual! If you don't, other employees will see
that there are
little or no consequences for their fraudulent
actions against the
organization.
Large corporate frauds such as Enron,
Worldcom and others
are started and carried out by senior management,
who have the control
to conceal these schemes from the owners or
directors and the external
accountants or auditors. These are obviously more
difficult to detect,
but as the management of the above companies now
know, they are not
impossible to detect.
Almost every corporate fraud
perpetrated by employees
will succeed for a period of time because the
proper accounting
controls are either not in place or are being
circumvented. A thorough
analysis by a qualified accountant (CA in Canada;
CPA in the United
States) will ensure that the controls are adequate
and functioning. Consult
a
qualified accountant with experience in fraud
investigations to ensure
that your company has an adequate fraud policy and
the necessary
controls in place to reduce the chances of your
organization being the
victim of fraudulent activities.
